Cybercrime-related account freezes require Magistrate orders within three months, failing which disputed funds become withdrawable.

The petitioners invoked Article 226 of the Constitution seeking removal of the freeze/hold/lien imposed on their bank accounts and fixed deposits by the respondent bank pursuant to intimations received from law-enforcement/cyber-crime agencies.

The petitioners relied upon Malcolm Murayis & Ors. v. State Bank of India & Ors., W.P. No. 1100 of 2024, decided on 26 April 2024, contending that the present case was covered by that decision.

The Court also recorded that, in relation to petitioner No. 2, the bank had raised a separate issue concerning pending KYC compliance.

Whether the petitioners were entitled to directions for removal of the debit freeze/hold/lien imposed on their bank accounts pursuant to communications from cyber-crime or other law-enforcement agencies.

Whether the amount allegedly connected with cyber-crime transactions could be retained in fixed deposits pending appropriate orders by the competent Judicial Magistrate under the applicable law.

Whether the bank could separately proceed against petitioner No. 2 for non-compliance with KYC requirements notwithstanding the direction concerning the cyber-crime-related debit freeze.

The Court applied Article 226 of the Constitution in considering the legality of the account freeze and the consequential relief.

It followed the decision in Malcolm Murayis & Ors. v. State Bank of India & Ors., which directed that the disputed amount identified by cyber-crime agencies be placed in fixed deposits and be liquidated only upon orders of the competent Judicial Magistrate within the prescribed period, while permitting withdrawal if the investigating agency failed to proceed in accordance with law.

The Court referred to the requirement that police authorities act under Section 102 of the Code of Criminal Procedure, or the corresponding applicable provisions of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), concerning seizure/freezing of property connected with an alleged offence.

It further recognised that bank action relating to KYC remains governed by applicable RBI rules and banking procedures, independently of the cyber-crime-related freeze.

The Court held that the present matter was covered mutatis mutandis by Malcolm Murayis.

Applying that precedent, it balanced the petitioners’ right to operate their accounts against the need to preserve any amount identified by law-enforcement agencies as linked to alleged cyber fraud.

Instead of permitting continued blanket freezing, the Court directed that the disputed amount be retained in fixed deposits until the competent Judicial Magistrate passed appropriate orders within three months, thereby preserving the evidentiary or restitutionary interests of the investigation while allowing the remaining account operations to continue.

The Court clarified that this direction did not prevent the bank from independently undertaking KYC-related action against petitioner No. 2 in accordance with RBI rules and applicable procedure.

The respondent bank was directed to keep the amount reported by the crime agencies as disputed in fixed deposits, which could be liquidated only after orders of the competent Judicial Magistrate within three months.

If the police agency failed to proceed in accordance with the applicable provisions of the BNSS or other relevant law, the amount could thereafter be permitted to be withdrawn by the petitioners under intimation to that agency.

The SBI accounts bearing Nos. 10765999824 and 20306747810 were directed to be unfrozen.

The Court expressly preserved the bank’s power to take independent action concerning petitioner No. 2’s pending KYC compliance.